tv Worldwide Exchange CNBC September 30, 2016 5:00am-6:01am EDT
shares slam, the stock don't slide and the questions about the firm's stability. global market fears. could this be another lehman brothers moment? the risks and reality. u.s. versus europe. the ryder cup tees off this morning. "worldwide exchange" begins right now. ♪ good morning. welcome to "worldwide exchange". happy friday. i'm sara eisen.
>> i'm wilfred frost. good to be back. feels like a whole week. >> i had a few days off. >> you had wells fargo. >> we're back together on a friday. so much market action to be discussing. no one better i would like alongside that. fears about the future of deutsche bank shares. dropping to a record low this morning. as you can see around about 4%. we're off the lows that opened initially down. we're off those lows but still down 4.3% in german trade. we'll have a live report from the firm's frankfurt headquarters in just a minute with lots of analysis coming straight up. first let's check in on global markets. >> we saw an impact on u.s. stocks yesterday. in the session u.s. futures looking up this morning. dow futures are up 14.5 points. s&p futures up almost one. nasdaq up about .4 after a
brutal sell off yesterday that took the dow down 200 points and s&p 5001%. deutsche bank was seen as the culprit. those adrs that trade in the u.s. took a slide after midday. for the ten year treasury note yield you saw some safe-haven buying. that's why we see yields lower at 1.54 moving south again this morning. buying up treasury, buying up safe-haven debt around the world. when you think yields can't go lower they are lower again. . >> also lower are european equities. the banks the worst performing sector. dax down 1.2%. given the moves in some of the banks we're talking 4%, deutsche, 3% credit suisse, 5% for commerzbank. it's not such a bad performance from the rest of the index as we can see the best part of 1% ftse 100 just over 1% for germany, france, italy and spain. let's look at asian trade at
this hour. we're looking at a positive performance for shanghai, up a quarter of 1%. that selloff on wall street affecting most asian markets. japan and hong kong closing down 1 and 2% respectively. oil a big story this week after it climbed yesterday again. perhaps some profit taking this morning. oil prices are down. wti down a little more than 1%. 47.30. it's an up week for oil and unexpected deal announced biopeck. brent, 48.64 down 1.2% and gasoline prices down a percent as well. as for the u.s. dollar let's show you where we are. it's stronger against the euro. we go back against 1.12. there's a bit of a risk off kind of feeling to this market. largely because of the european bank worries. 1.99. we watch those dollar/yen levels
closely especially when the yen strengthens. the pound stays weak below 1 30i7. as for gold. stronger dollar against the euro and stronger gold as well. flight to safety up .3% or $3.60. deutsche bank and we go frankfurt for the latest. >> reporter: thank you so much. while we have a letter from john cryan that the bank has never been better but markets really are playing a completely different story. so, of course, the equities of deutsche are down. their bonds which are the most speculative bonds are trading at record loss. cocos at record loss and
spreading to the forex market. the swiss franc are up on the deutsche news. deutsche is the biggest bank in europe. the biggest bank in germany. systematically relevant bank and almost too big to pail out. that balance sheet is as big as one year gdp here in germany to give you a perspective of how big it is compared to the economic power of germany. of course, there are rumors that the bank might eventually need to be bailed out by the state. the merkel government is refusing that. they are not doing or have been saying they are not talk about it, they are not thinking about it but at the same time we had reports saying that there's an emergency plan in the making and according to my sources berlin is actually really working on such a plan, which is in its infant phase, i would say, they are working on something to
essentially stabilize the situation of the bank in case it is getting worse. back to you. >> thank you very much for that. so let's just recap some of the big movers in the share price recently. first of all to put things in perspective yesterday's move was very much down to liquidity fears on the news that we saw, that some of the hedge fund clients had left the business. just to put that in perspective a total of 800 clients in that business been stable. >> reports out about ten. >> about ten. and as for assets they have 300 billion euros in client assets and 4 billion euros over the last quarter. those are the numbers. more importantly let's look at their liquidity position to fight back. their liquidity position is strong. they have 223 billion currently of liquidity reserves. that's equal to about 20% of their assets. that's way more than a likes of
lehman and bear had. >> not to mention the european sma central bank has been all in in funneling money. liquidity is not the problem. >> exactly right. their liquidity is strong anyway if things get worse central banks are in a much more prepared position around the world than they were at the time of likes of bears and lehman. so they got a lot of liquidity. let's look at the second issue that's affecting share price over the last couple of months. that's the doj fine, reminder of the size of that. doj has asked for $14 billion. deutsche bank says it will pay less. the leak and market move then have increased the push. this you would say is a massive one. the clock is tick on it. they have four weeks to sort it
out. however it's a one off issue unlike the liquidity concern where people feared it could be more self-fulfilling. if we can go back to basics on banks. clearly capital assets leslie builts, liquidity percentage of assets. deutsche bank has lots of liquidity, they got small amount of capital not cash. small amount of capital. so insolvency is a risk. if this doj fine comes in bigger than expected or takes too long to arrive and their capital falls that's a big fear for them but not self-fulfilling. liquidity is not so much. so when we saw big moves yesterday based on stories of liquidity concerns i'm not too worried. when you see big moves because investors fear this fine will be $14 billion that's a fear. but they have ample liquidity. if the doj fine doesn't come any time soon or too big that's a
big issue. >> last night it said politically does the doj don't responsible for helping to bring down what is one of the major international banks, the biggest bank in germany? probably not. maybe that political pressure could ease. the other thought is there's a negative feedback loop. at some point all these negative headlines and this sort of perception problem which is the way i think deutsche bank has been responding to some of these problems, can amplify and can hurt the stock price and then can put the bank in a tricky financial position. >> i think the doj is probably waking up to that aspect. do they want to do this. we heard stories they want to sort this out quite quickly. we expect or the bank hopes they will go settlement soon. i think if you get a settlement of around five or six even those that's higher than the initial,
that would be taken as a positive. market doesn't care how big fine is they want it to be kiermd and move on. as to the self-fulfilling nature these things can get out of hand. they got enough liquidity to deal with it. for more clients to leave from the hedge fund part of the business, is deutsche bank still doing a good job. still top three in fixed interest, commodities and currencies. there isn't a self-fulfilling nature and they have liquidity to stamp it out. crucial to separate liquidity issues and credit issues. absolutely. for his part, this ceo warned customers to tread carefully and stay away from deutsche bank banks. he calls the bank unanalyzable.
he said it's too binary. the market is going to push down deutsche bank until there is some recognition of support. they will get assistance if need be. angela merkel, how could she not step in with a yes there's a german election coming next year but she won't now before it gets to crisis level. >> there has to be a crisis point. what's underestimated about potential for state bailout is where that crisis point has to be. it has to be super, super deep. the reason being we just had the italian banks denied a similar state bailout by germany. this would be the biggest example of the european project being run by the germans for the germans. if we got to a point of germany bailing out deutsche bank. >> after they went after the peripheral countries.
>> that's the biggest example. state bail out is slightly overestimated stateside as a potential backstop. i don't think deutsche bank is in that much trouble but i don't think a state bail out is likely. weirdly the italians would cheer it. they would say you hypocrites but cheer it because then they could do the same thing. there's a lot of political pressures. the one statement i do see as possible, purely conjecture on my part is her paugt bit of pressure on the u.s. government to put pressure on the domg to say your going cripple us? we have no evidence of that. that's a slightly more plausible way for her to get involved. no reports of that happening yet. european central bank governing counselor commenting on the banking situation saying he doesn't believe europe phoenix new banking crisis. he did suggest the financial sector is in a transitional
phase. says he doesn't want to overdramatize it. he isn't commenting on the troubles deutsche bank is face. but he said it's important to consider all consequences before letting any financial institution go bankrupt. switching focus, i can't believe this is the less big of the two banking stories. let's go to wells fargo. of course the ceo john stumpf face a second hearing in nine days. he agreed to important fete $40 million of his pay. 2 million fake account number could be 75% lower based on their latest internal investigations. the full board is being investigated internally not just executives like him. he has spoken to warren buffett once. but as becky quick reports it was not a negative conversation. but the focus overall of yesterday was once again on the tone of the hearing not the
content. lawmakers still angry. >> the whole board needs to go. if they are going to allow someone to be in charge when time after time you just talked about you fired 5300 employees. when you found out that they were doing something wrong. they were fired. because they were doing something wrong. well something is going wrong at this bank. and you are the head of it. so shouldn't the board -- from your own admission, if the buck stops with you, as you came out here and said i apologize, the buck stops with me and you have to also admit that criminal activity was going on in your bank, then you should be fired because it stops with you. >> the other big takeaway was the rising pressure for other banks to be dragged into what so far has bean single company issue as well as whether the regulator did a good job or not. shares ended down yesterday 2%, pre-market today down half a
percent. >> they have been slammed. they are down more than 11%. but i would note about the bank moves especially wells fargo is this is, first of all, totally different than deutsche bank. this is a reputational problem and affecting wells fargo shares. it's not dragging the other banks in. what's happening with deutsche bank is. it's dragging other banks in, morgan stanley. that's why as far as the overall systemic threat. wells fargo, clearly won't to be done with its political heat and potentially more investigations from lawmakers and from some of the enforcers like the sec. >> the share price is spot on. it's important because the underperformance relative to the rest of the u.s. banking sector came in the first week. scandal lost about 10% more than the rest of the sector. been more in tone more with the sector since then. that's worth noting. other performance relative to
the other banks in the u.s. came early on. since then the shares have stabilize. the issue is not put to bed. it will rumble on. the share price has stabilized. yields have come down. lots of analysts have come out, some that we really like and trust with buys on the stock even though tissue is not sorted for mr. stumpf or from a pr position. >> buffett issue isn't sorted. great becky got to talk to him. 10% of the shares he owns. what will he do with that position. >> great becky offsetting those inaccurate reports that broke earlier in the day. but he was considering some negative issues. >> still to come on the show, we'll cover the morning's top story. we're talking about deutsche bank, shares falling in european trade as fears pull global stocks lower. >> as we head to break here's where markets stand on the last day of the quarter.
the nasdaq the big winner in q3 as you can see up more than 9%. quite a positive quarter overall. you wouldn't think that on days like yesterday. but markets positive across the board for q3. we're back in a couple of minutes. cal thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods? the value of capital is to create, not just wealth, but things that matter. morgan stanley
really big surprise today. nasdaq supeis up 9%. the adr closed stateside down 6%. opened down about that much this morning for johnson trade but off the lows as you can see down just 4% as we look at things. the week has been a touch one for deutsche down 8%. lots more analysis coming from us and the rest of the shows throughout the day on cnbc. that's weighing on european trade. given how much the banks are down, commerzbank, credit suisse, also down. moves on the rest of the market therefore in perspective not too bad. contagion not as bad as could it be. we're down about 1%. >> indexes. >> they are in europe.
>> when we come back your money your vote. 38 days until the presidential election. we got the latest from the campaign trail next. but before we head to break here's today's national weather foreca forecast. it's friday and basically things looking the same on this weather map as they did yesterday. low pressure spinning in the mid-atlantic and ohio valley trying to bring more rainfall. some parts of delaware over 12 pinches of rainfall. interstate 81 and 95 will have trouble if you're traveling today. over an inch of rain at reagan, bwi, two inches. back to the west dry weather is settling in. don't have to worry about hurricane matthew until next week. anybody worrying about the rainfall in south florida that's not associated with that. cool weather to north. chicago 64 degrees with a few rain showers. you've been about five degrees
welcome back to "worldwide exchange". let's get you up to speed on the market action. futures little changed this morning after a pretty steep selloff the dew closed off 200 points. the nasdaq futures are actually in the red. dow futures up 13.5 and s&p futures are pretty much flat. the story of the mark and of
yesterday's trade, deutsche bank taking down the entire global market with pressure on its shares. as you can see shares are still getting hammered down almost 5% but that's off the lows of the session in germany. the dax is down a little more than 1%. >> this move is not in addition to what we saw in the afternoon. >> that was the adr. now to politics, hillary clinton's campaign is seizing on a report donald trump may have vip lated laws in the 1990 when he sought to do business in cuba. executives from trump hotel visited cuba in 1998 to meet with the government sepending $70,000 on the trip. trump's campaign manager kellyanne conway is denying that trump broke the law. happening right now in jerusalem, former israeli
president shimon peres success laid to rest. the ceremony success attended by thousands of admirers and dozens of international dignitaries. president obama and former president bill clinton is there. they will eulogize shimon peres. president trudeau is there and president francois hollande is there. i like how the "new york times" sort of calls it, it was part state funeral, part peace conference. moment of transition for the country that's drifted away from puerto rico peres' vision. but it shows what kind of legacy he left on the state of israel and the world. >> amazing lineup and justifiably so. still to come this morning's top stories, questions about deutsche bank's future. we'll tell you what the firm's ceo is saying today to his
staff. a deep dive into his letter. >> first as we head to break let's look at the top dow performers. stay tuned. you're watching "worldwide exchange" on cnbc. all the networks are great now. we're talking within a 1% difference in reliability of each other. and, sprint saves you 50% on most current national carrier rates. save money on your phone bill, invest it in your small business. wouldn't you love more customers? i would definitely love some new customers. sprint will help you add customers and cut your costs. switch your business to sprint and save 50% on most current verizon, at&t and t-mobile rates. don't let a 1% difference cost you twice as much. whoooo! for people with hearing loss, visit sprintrelay.com.
it's friday, september 30th, 2016 and you're watching "worldwide exchange" on cnbc. ♪ ♪ baby we don't need no reason why ♪ good morning and welcome back to "worldwide exchange". i'm sara aseisen. >> i'm wilfred frost. let's check in on global markets. futures are taking a breather. we are flat. dow slightly higher. s&p and nasdaq slightly lower. u.s. futures are shrugging up what's happening in europe this morning if we look at european trade we'll see it's in the red by 1%. most of the market are more for germany and france on 1%. banks are worst performers. deutsche bank down 4%. a lot of other banks, commerzbank, credit suisse, french banks down just shy.
rest of the market not doing too badly. i would add, those relative to the trade we saw in the adrs yesterday this is a slight improvement. the european stock of deutsche finished flat yesterday at about 12:00 or 11:30. it opened down. and has rallied off that. this is a slight improvement. >> well get to some reasons why. the company has been out trying to reassure employees and investors. asian trade quickly four. we've seen them play catch up or catch down, i should say following the wall street declines yesterday. japan and hong kong down 1.5 and 2% respectively. >> oil giving back its recent gains. wti 47.19. down 1.3%. brent down almost 2% at 48.39. it's the last day of not just the week, but the month and the quarter as well. and we should note it has been a
strong week and month for oil. we'll see where oil settles today. oil super7.5% for the month. up 7%. this comes on a week where opec makes a surprise deal to limit production. we'll see the details of that as we head into november. >> lower leads don't be the name of the game. the ten year note yield 154. for the u.s. dollar it's really been little change. the euro under some pressure with these new worries about deutsche bank potentially how that impacts the german and european economies weighing on the euro just below 1.12. not a sharp move. dollar flipped higher than janz yen, weaker yen tends to bode well for sentiment. 101.03. the pound sunday pressure, 129.54. we should note the swiss franc is strengthening the.
as we watch the fall out over deutsche bank. gold quickly let's check on that. it's stronger today. it was stronger yesterday as well. up about half a percent, less than half a percent. gold is up about 1% so far this month and that would make it its third positive month. >> to today's top story, deutsche bank ceo john cryan writing an letter to employees saying work could be unsettled that a few hedge fund customers threat bank. but he said the bank is solid and has 20 million customers. he goes through the bank's liquidity position, highlighting that figure we talked about earlier, 200 billion in terms of cash reserves as to why lotion a few hedge fund clients isn't too much of a worry. the rest of the letter tends to be typical of a ceo writing to his customers. not too much detail in it. one line in it i want to bring
out. earlier in the week they got a boost when they sold abby life. that helped the share price a little bit. one reason why the share price declined was a day that a 90-day confirmation window for the sale of its chinese bank had expired. the chinese sale would be around 3.5 to 4 billion. odd line to pick up in a letter to his staff. our stake in chinese bank will be stabilized. he said it will be finalized. that's a particular line which is news to the market. >> my big takeaway, credit
reserves is our biggest factor. let's discuss it more. d domenick elliot joins us now. let's round off these issues. they have capital issues. that relates to the doj fine. do they have liquidity issues that reflects the stories yesterday that they are losing hedge fund clients? >> good morning. i think the key thing to be here is that the liquid assets that we've been talking about and you have been mentioning on the show, the 223 euros ever liquid assets that can cover them for a long period of stress. the rescue laer to requireme-- requirement requires 30 day. the last time they disclosed the ratio they needed to meet they had more than effectively 30 days worth. they had some head room there.
effectively they needed to make sure they had 160 billion live quid assets to last 30 days and they had 190. that was back at the end of september. since then they increased their liquidity. it gives them a bit more than that 30 day window, the very bare minimum. >> that's the liquidity position. the capital position which, of course, is very much linked to stories about how big this doj fine will be. is that very weak, though? >> well it certainly looks weak relative to peers and so the point you were making earlier from that letter about the sale of the stake in this chinese bank is critical. the moment capital ratio position certainly at the end of june was 10.8%. that's quite weak relative to all that. it's still above the regulatory requirements. that stake sale in the chinese
bank would have taken it up to 11.2%. it's critical that's still on track. by michael can you allocations even if this maximum fine we heard about from the u.s. justice department of $14 billion was to come apparent, then it would still have a capital ray shove 8.8. that's above the minimum requirement. so even then they would still be okay. wouldn't look great. would need to raise some capital soon after that but at least they would be okay on that basis. it sounds like you're in sync with sill fred we're not at crisis scenario levels. but this is turning from a financial issue into a political one. u.s. versus eu with doj fine. germany versus the rest of europe. how do you see the political reckoning playing out? >> we've had loose talk. i think it was a mistake for
justice department officials, if it was to them to leak that $14 billion number. i think it was a mistake for angela merkel that the german chancellor to tell a german magazine focus that there would not be a bail 0out for deutsche bank. all of this stuff only inflames markets and gets them worried and much better if this stock can be resolved quickly. that's theee thing now for deutsche bank. it's only up to a point within their control. but if chief executive john cryan can take decisive prompt action to settle that fine even if it's a little bit more than they hoped for that would help to put this to bed. >> just to round things off we know, of course, u.s. banks were responding. there's general risk off trade yesterday around the world. take the u.s. out it and tell us for around the rest of europe and their banks if we did get to disaster scenario which is not the best case, how bad would that be for the rest of europe and its economy?
>> well, if you look at the international monetary funds recent reports on german banks and wider banking sector globally they point out as i'm sure many of your viewers are aware deutsche bank is the most risky bank globally. it has a lot of trades out to a lot of other banks all over the world more than any other. a lot of derivatives. that's the worry. if deutsche bank were to fail or were to be bailed out there would be this ripple effect. and that's the real problem. it makes the european banks actually even more than the u.s. banks that are closely connected, the american banks are also have a lot of exposure. that's why it's such a problem. >> thanks very much for joining us this morning. come back again another time. now to the economic agenda for today we'll wrap up the trading week with a tryoff economic reports. august personal income and
spending numbers due out at 8:30 a.m. eastern with both forecasts to have risen. 9:45 look for september chicago pmi followed by final read on september consumer sentiment at 10:00 a.m. robert kaplan will be speaking this afternoon. that does wrap up a busy week and a busy quarter and a busy month. stocks positive for the quarter. negative for the month. negative for the week. october we should note is usually positive one. 70% of the time the dow and s&p are positive over the last 20 years. >> i hate to admit i haven't checked these numbers. when we flashed up today's quarter it's been positive. bumpy september. let's move on to sports. it's the u.s. versus europe for the ultimate bragging rights. we're not talking about doj fines here. the first-round of the ryder cup tournament tees. europe is trying to win it's
fourth straight cup in a row. >> congratulations. when we come back -- we'll be watching. today's must read stories. first as we head to break here's a look at the movies that are opening this weekend. deepwater horizon is expected to take second place. and be sure to stay tuned for "worldwide exchange" on cnbc. c, used by this bank, to protect this customer, who lives here and flies to hong kong, to visit this company that makes smart phones, used by this vice president, this little kid, oops, and this obstetrician, who works across the street from this man, who creates software. they all have insurance crafted personally for them.
cathy's gotten used to the sme...in her kitchen rbage... yup, she's gone noseblind. she thinks it smells fine, but her guests smell this. ding, flies, meow febreze air effects heavy duty has up to... ...two times the odor-eliminating power to... ...remove odors you've done noseblind to [inhales] mmm. use febreze air effects, till it's fresh and try febreze small spaces... ...to continuously eliminate up to two times the odors... ...for 30 days febreze small spaces and air effects, two more ways... [inhale + exhale mnemonic] to breathe happy.
>> now to this morning's must read, stories in the familiar catching our attention. let's look at shares of deutsche bank. that's a top story. down 4% off the lows of the session. now it's time for our must read stories and i pick the "usa today" because for the first time in the paper's 34 year history it's taking a side in the election. their editorial board usually doesn't endorse candidate. they are not doing so this time either but are writing trump is unfit for the presidency. here's the reasoning. our bottom line advice for voters is this. stay true to your convictions. that might mean a vote for clinton the most plausible
alternative to keep trump out of the white house. or it might mean a third-party candidate. or a write in. or a focus on down ballot candidates who will serve the nation honestly, try heel its divisions and work to solve its problems. they say why trump is unfit. they go to his honesty, tempermen. not surprising because most every major paper has come out and endorsed clinton. even papers like the cincinnati inquirer, my hope town paper which has always slorsed a republican is now endorsing clinton. but the "usa today" is interesting because the editorial board could also not unanimously come to agreement that hillary clinton is the right choice. >> how is "usa today" seen as the most impartial coming out either way is a big moment. >> they like to see themselves impartial. we've done a lot of their op-eds
as must reads and they do an ed board piece and then do an opposing view. they do try to position themselves as impartial. trump pushed them this time. on that note on the election we're approaching the top of the hour that means the team is getting ready for "squawk box" and andrew ross sorkin joins us not from new york city but from the heartland of america, iowa for a look at what's coming up. why are you in iowa >> we're "squawk"ing the vote. trying to talk to some real people figure out the way they feel. this is a battleground state. donald trump up about 5% here at the moment. hillary clinton was here yesterday. mike pence was here on sunday. it's one of those states depending how it swings could really impact the election in a particularly meaningful way. early voting just opened in this state yesterday. and as you can imagine the papers here and i got "the des
moines register" -- "usa today" a remarkable editorial. one of the reasons we're here is to talk to people, to really understand the issues that are facing local business people here and especially farmers. this is farm country and we went out yesterday and spent some time with them. take a listen. >> one of the important issues for us is getting more trade. agriculture is one of the things that has the most to gain from tpp. and nafta has been good for us too. we're starting on a price of, prices are all headed down now. we're less than half. and that's kind of a scary thing when you think about the future. we need more exports. >> coming up on "squawk," we'll "squawk" the vote for the next couple of hours. we have the head of the democratic party here in iowa from the caucus. we have a major gop donor who is part of the transition team. we also had have the head of
heidi grocery. the owner of java joes where we are right now here on 4th street. some friends of ours from "des moines register" to talk about the issues they see facing the country and this very state. that's what we got on tap, guys. >> andrew great stuff. we look forward to that. you know where there's a lot of problems in the house finance committee. i feel like we heard as much about a lot of members life stories as we did -- >> did you have fun at that hearing? >> we did. but it went on a long time. >> admonishing mr. stumpf. >> he got in more the first 20 minutes. >> i think they did their homework. they brought up some issues, especially in the early questions. >> they did. often they didn't ask questions they made statements. >> they chanld the outrage. >> markets appear to be nervous about deutsche bank but is it for good reason?
a global outerwear manufacturer, allowing them to handle the recent popularity boom in fanny packs. it's pretty fly. unless being '90s is your thing. well, cdw and hpe services gave them the flexibility they needed to scale up their scale up their cloud resources, making sure supply meets demand. poser! [ classic ringtone ] what's crack-a-lackin'? hey, did you remember to set the vcr?
increased flexibiilty by hpe services. i.t. orchestration by cdw. exchange". deutsche bank the key capitalist for markets yesterday and today. down 4%. worth pointing out, of course, an improvement from where the adrs were. down 6%. it has rallied in the day but still down for the week. >> coming back from falling below $10. or 10 euros. >> let's discuss it more. >> joining us now we have an expert here on the financial system globally and central banks, rich clarida. how big of a warning sign is this flashing to you what's happening with deutsche bank for the entire global financial system? >> right now deutsche bank, as
your prior guest mentioned has a lot of liquidity. i think it's been known for quite some time deutsche bank among the global banks has less capital than others. as you also are aware there was this leak of a potentially large fine from the department of justice. so right now to me this does not look like its systemic but clearly a very, very crucial tough time for deutsche bank. >> what this doj fine ends up being? >> i think that's an element of it. i think the key thing they have to raise more capital in any event and in an environment where their stock -- their stock is already down. the doj sort of gets the headlines. but there are broader issues here as well. >> rich, eight years since lehman brothers. all fresh in our minds and
investors minds. when you see a bank's share price plunging when you get reports during the day about hedge funds worrying about the counter party risk. we all remember those days. it's important, though, to draw the distinction between what's happening now and what happened then, lehman, bear stearns, can you do that for us. can you explain why this time is different? >> there's a couple of big differences. the first is that deutsche bank is a bank that has a very, very large deposit base. secondly as i said they have a very ample supply of liquid assets. we're in an environment where all-big banks have to go through these stress scenarios in which they can fun themselves for more than 30 days if they essentially lose a lot of their funding and deutsche bank is above those minimums right now. lehman's problem is nearly end hydrogen no liquidity. it's a much different situation certainly. >> if we did have disaster
scenario for deutsche bank, not our best case but if we did what would that mean for the u.s. banking system? >> it would depend on what it looked like. the imf did a study this summer that argued among the major banks in the world, deutsche bank is one of the most systemic in that it has a lot of the footprint in the global markets because of all of its derivative positions. so, obviously disaster scenarios that aren't pretty for anyone but that certainly is not i think sort of a plausible consideration right now. >> so i wonder how much the u.s. equity selloff we saw yesterday and basically in september just has to do with the fact what we're 2% away from an all time high and the market has been stretched historically on valuation and how vulnerable does this make the equity market on sensitive headlines out of europe? >> i think that's a good point. i think that, you know,
conditions are, i think supportive forex, discount rates are low. global economy ploweds along at 2.5% growth. as i said, i don't think this is fundamentally systemic but does point to an addition what we observed with the italian banks. also elections in europe next year, important elections in germany and important elections in france, a referendum in italy. right now the markets, in part, reacting to political uncertainty as well as some of these other factors. >> this last week of volatility, these issues for deutsche bank as it takes rate hikes for the rest of the year off the table again? >> i don't think so. my baseline case would still be based on what we see right now the fed expects it will hike in december. it's not a slam dunk.
they say they are data dependent. at the fed meeting recently 14 of the 17 participants indicated they thought it would be appropriate to hike in december. chairman yellen said that. rate hikes are not a slam dunk. >> here we go again with the ten year, 1.54 buying of bonds. where is pimco on where we settle out of the year >> rates are low because of factors you mentioned, flight to quality, flight to safety. from our perspective, you know, just taking outright interest rates is not a way that makes sense to invest. we're looking at taking advantage in credit spread and global opportune. you're right with zero interest rates you're not getting paid a lot to buy government bonds. >> thank you. you're watching -- >> deutsche bank. >> obviously.
good morning. breaking news, deutsche bank shares slammed again, the stock continues to slide amid questions about the firm's stability. squawking the vote. we're taking the political pulls in the swing states. andrew is in iowa. no doubt with like a full-body rash. he's in a fly over state. talking to voters and party bigw bigwigs. plus the u.s. versus europe the ryder cup tees off this morning. one gutsy fan stole the show yesterday the must see video is straight ahead. it's friday, september 30th,
which if i'm correct the last day of september. yep. and "squawk box" begins right no now. ♪ >> announcer: live from new york where business never sleeps this is "squawk box". good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen. andrew ross sorkin is kicking off our new squawk the vote series. he's live in des moines, iowa. andrew, good early morning to you. >> hi. >> hey, becky, we have six big electoral votes here that are up for grabs and we'll be telling you about it. joe is giving you a hard time already, fly over country. this is real america. we've been spending some time at gentlem java joe as. not a lot